Tokyo: Japan‘s planned military expansion could face significant cuts after Finance Ministry officials proposed a lower-than-expected defence budget for the five years beginning April 2027. The proposal has reportedly prompted warnings to defence contractors that orders for some weapons and military equipment could be reduced by as much as 50 per cent.
The proposed spending range of 50 trillion to 60 trillion yen ($313 billion to $376 billion) is higher than the 43 trillion yen allocated under Japan’s current five-year defence plan. However, it falls considerably short of the 80 trillion yen that some defence officials and ruling Liberal Democratic Party (LDP) lawmakers had expected and factored into discussions with contractors.
The development could affect Japan’s plans to strengthen its military capabilities amid growing security concerns in the Indo-Pacific, particularly China’s expanding military power and the possibility of a conflict involving Taiwan.
Prime Minister Sanae Takaichi’s government has pledged to accelerate defence expansion. However, competing spending priorities, including proposed tax cuts and economic growth investments, are creating pressure on public finances.
Japan warns defence contractors of possible order cuts
Four people familiar with the matter told Reuters that Japanese officials had warned defence contractors of substantial reductions in expected orders because of financial constraints.
The proposed budget could result in cuts of up to half in planned purchases of certain missiles and aircraft from domestic and international suppliers. The potential reductions could include US-made F-35 stealth fighters, according to the sources, who spoke on condition of anonymity because they were not authorised to discuss the matter publicly.
The warning has raised questions about the scale of Japan’s next military expansion programme and whether its defence industry will receive the orders it had anticipated.
Japan’s major defence contractors include Mitsubishi Heavy Industries, Mitsubishi Electric Corporation and Kawasaki Heavy Industries. These companies are involved in supplying equipment and technology for the country’s military requirements.
Mitsubishi Heavy Industries and Mitsubishi Electric declined to comment on the reported budget proposal. Kawasaki Heavy Industries did not immediately respond to Reuters’ request for comment.
The proposed spending range is still under discussion, and the potential reductions should not be treated as final procurement decisions.
Finance Ministry proposes 50–60 trillion yen
Finance Ministry officials reportedly presented the proposed spending range of 50 trillion to 60 trillion yen for the five-year period beginning in April 2027 during discussions last week.
Although the proposal represents an increase over the current five-year allocation of 43 trillion yen, it is substantially below the 80 trillion yen figure that some defence officials and LDP lawmakers had assumed would be available.
The gap between the expected and proposed allocations could force the government to reconsider several planned purchases and prioritise projects considered essential to national security.
Finance Minister Satsuki Katayama said the proposal had not reached a stage where detailed decisions could be discussed publicly.
Responding to questions about the proposed spending, Katayama said the advisory panel on security and defence had not yet examined the matter in sufficient detail.
She indicated that it was premature to comment on the final allocation while discussions remained underway.
The Defence Ministry also said no decision had been taken on the size of the next defence expansion programme.
A ministry spokesperson said the government’s position was to identify Japan’s defence requirements and determine the necessary budget accordingly.
The comments underline that the 50–60 trillion yen proposal is not yet an approved spending plan.
Japan faces pressure to meet defence spending targets
The lower proposed allocation could also complicate Japan’s ambition to increase defence expenditure to 2 per cent of gross domestic product (GDP).
According to Reuters calculations, spending of up to 60 trillion yen over five years would leave Japan short of that target.
The debate is taking place amid growing pressure from the United States for its allies to increase military expenditure.
US President Donald Trump has repeatedly urged partner countries to take greater responsibility for their own security by allocating more resources to defence.
The 2026 US National Defense Strategy calls on allies worldwide to spend 3.5 per cent of GDP on their armed forces, with an additional 1.5 per cent directed towards broader security requirements.
These expectations have added to the pressure on Japan as it attempts to balance its regional security commitments with domestic financial limitations.
Japan has been expanding its military capabilities in response to China’s growing military strength. Concerns about a possible Chinese attack on Taiwan have become an important factor in Tokyo’s security planning.
Japanese officials worry that a conflict involving Taiwan could threaten the country’s nearby islands and important maritime routes.
Japan’s geographical position makes the security of surrounding waters and shipping lanes particularly important for its economy and national defence.
Takaichi government plans military expansion
Prime Minister Sanae Takaichi has pledged to speed up Japan’s defence buildup, with her government expected to unveil a revised national security strategy and defence plan by the end of 2026.
The proposed expansion is intended to improve the country’s ability to deter potential attacks and sustain military operations during a prolonged conflict.
Among the priorities are increasing ammunition and missile stockpiles and deploying more military drones.
Japan is also seeking to strengthen its ability to respond to rapidly changing security situations in the region.
However, the reported budget constraints could force the government to reassess the pace and scale of some procurement programmes.
One of the sources told Reuters that planned drone orders would not be affected by the revised funding proposal.
This suggests that the government may seek to protect certain capabilities even if purchases of other weapons systems are reduced.
The extent to which aircraft and missile procurement could be affected will depend on the final budget and the government’s assessment of its defence priorities.
Proposed food tax cut adds to financial pressure
The Finance Ministry’s cautious approach is also linked to the government’s domestic economic commitments.
Three people familiar with the discussions told Reuters that ministry officials believe a sharp increase in defence spending would be difficult to finance alongside Takaichi’s plans to invest in economic growth and reduce the sales tax on food.
The proposed food tax reduction could create an annual revenue shortfall of approximately 4.3 trillion yen.
The government would need to identify alternative sources of funding to compensate for the lost revenue. These could potentially include foreign exchange reserves, according to the sources.
The competing demands on public finances have created a difficult calculation for the government.
On one side, Japan faces pressure to strengthen its military capabilities in response to regional security threats and expectations from Washington. On the other, it must finance domestic economic priorities while managing the impact of a possible reduction in tax revenue.
The Finance Ministry’s proposal is therefore likely to become a point of disagreement within the ruling party.
Security hawks likely to oppose lower allocation
The proposed spending range is expected to face resistance from security hawks within Takaichi’s LDP, particularly lawmakers who believe Japan needs a much larger military budget to prepare for potential emergencies.
One ruling party official familiar with the discussions said a figure in the 50 trillion yen range would be inadequate if the objective was to develop the capabilities needed to deter and prevent a security crisis.
The official warned that a contingency could arise at any time and argued that Japan should not underestimate the resources required to respond.
The disagreement reflects a broader debate over how much Japan can afford to spend on defence and how quickly it should expand its military capabilities.
A lower allocation could require the government to prioritise certain weapons systems, reconsider procurement schedules and negotiate revised arrangements with suppliers.
At the same time, a significantly higher budget would require the government to identify additional revenue or financing options at a time when it is considering tax reductions and economic investments.
The final five-year defence plan will determine the scale of Japan’s military expansion from April 2027. Until the government settles the allocation, defence contractors and security policymakers will have to work with considerable uncertainty over future orders.
The central challenge for Takaichi’s administration will be to reconcile its security ambitions with the country’s financial capacity without undermining its ability to respond to regional threats.